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NAFTA negotiations continue - major outcomes still uncertain

NAFTA negotiators at the working level met intersessionally from December 9-15 in Washington D.C., conducting technical discussions on digital trade, financial services, customs, energy, state-owned enterprises, and textiles, among other chapters.

No chapters were closed during the latest meeting. Negotiators also mostly avoided addressing in detail the most controversial proposals tabled by the United States at the fourth round of negotiations last October (i.e., rules of origin for automobiles, dispute settlement, the “sunset clause,” or procurement). These will likely be discussed at the next formal round on January 23-28.

However, some of the chapters discussed during the December meeting did cover substantive areas of disagreement remaining between the U.S., Canada, and Mexico:

Chapter

U.S. proposal facing Canadian and/or Mexican opposition

Digital Trade

Inclusion of safe harbor liability protections for internet companies

Textiles

Elimination of tariff preference levels (TPLs) for certain textile goods that do not meet rules of origin criteria

Customs

Increase level of eligibility for de minimis exemptions to U.S. value of $800

Meanwhile, Congressional and industry stakeholders continued their push to persuade the White House to back away from the controversial proposals that could jeopardize the talks or lead to U.S. withdrawal. Groups of Republican Senators including Sen. John Thune (South Dakota), Cory Gardner (Colorado), Pat Roberts (Kansas) and Lindsey Graham (South Carolina) met with President Trump and Vice President Mike Pence in December and early January to express their reservations with the Trump administration’s current approach. Executives from General Motors, Fiat Chrysler, and Ford also met with Vice President Pence and U.S. Trade Representative Robert Lighthizer in late November.

The next January round is likely to be a pivotal moment for the course of negotiations. If Canada and/or Mexico again decline to present counteroffers on the various controversial U.S. proposals, they could force President Trump to initiate the process of U.S. withdrawal—or concede that his previous threats were a bluff. On the other hand, substantive counteroffers by Canada and/or Mexico could create a path forward for the Trump administration to achieve its renegotiation objectives. Mexico’s Secretary of Economy, Ildefonso Guajardo, suggested in remarks on January 9 that his government could accommodate an autos rule of origin with a higher regional content value requirement—a potential sign of Mexico’s willingness to negotiate on U.S. demands.

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